Key Takeaways




SBA Favors a joint deposit token which it claims will provide ‘freedom with regards to money creation.’



The paper details three design options for a deposit token: Standardized tokens, colored tokens, and joint tokens.




The Swiss Bankers Association has now released a white paper on a digital Swiss franc outlining various designs of deposit tokens on the blockchain.



Deposit tokens are tokens issued on a blockchain by a depository institution to represent a deposit claim. And are protected by the same regulatory safeguards that support commercial bank deposits.



From an issuing bank’s viewpoint, deposit tokens are only a redistribution of deposit liabilities on the bank’s balance sheet, with no modifications in the bank’s composition of assets.



The SBA white paper talks about a deposit token issued by regulated and adequately supervised intermediaries, redeemed by smart contracts and further denominated in Swiss francs. The paper adds that the token could be designed as a ledger-based security instead of a set of instructions to boost its potential.



The white paper by SBA further details three design options for a deposit token: standardized tokens that any commercial bank can issue with a uniform standard, joint tokens-issued by a licensed and supervised special purpose vehicle comprising of participating banks, and colored tokens- where each bank issues tokens with its own rules. The SBA, in its paper favors a joint token which it claims will provide ‘freedom with regards to money creation’.



Detailing the advantages of a joint deposit toke, SBA states that this kind of token could earn interest if held in a wallet with a bank, similar to a conventional deposit.



“From a technical standpoint, all the economic and legal requirements that have been identified can be met. In principle, the deposit token should operate on a public blockchain with additional protocols to ensure sufficient privacy and transaction efficiency’, the paper reads.



The debate around whether bank-issued deposit tokens could provide more stability than stablecoins has been going on for a while. Earlier this year, JPMorgan stated that Bank-issued deposit tokens are much safer than stablecoins for major institutions looking to transfer value across chains. A 2023 report has also noted that the rise of decentralized finance protocols may also result in the creation of liquidity pools for deposit tokens.